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Topic: Homebrewing CSA? (Read 4129 times)

I am a lawyer. Reimbursement for ingredients or other expenses is not selling homebrew. The fact that this is a corporate-type entity is significant, because corporations are not prohibited from homebrewing, that I know of. As a very general rule full of exceptions, anything an individual can do, a corporation (particularly a nonprofit) can also do. So ingredient-reimbursement within the same CSA would be legally akin to my buddy paying for the ingredients for one batch and me for the next and us sharing both batches.

That being said, it does sound like this CSA may be selling homebrew because of the "optional donations." Regardless, I would be shocked if the SFDA wanted to prosecute this CSA, and I seriously doubt the ATF is going to pick this one up, so it is "legal" in the sense that no one is going to be enforcing the law. California also has about the most lax alcohol sales and distribution laws around, fwiw.

Skyler, I vaguely recall reading that the IRS technically expects people to report bartering activity - has that changed? How is this different? If the brewer is being reimbursed in either money or goods, wouldn't that be a taxable transaction? And if it is a taxable transaction, isn't that the same as selling?

Regardless, I would be shocked if the SFDA wanted to prosecute this CSA, and I seriously doubt the ATF is going to pick this one up, so it is "legal" in the sense that no one is going to be enforcing the law. California also has about the most lax alcohol sales and distribution laws around, fwiw.

I wouldn't be shocked, unless San Francisco is truly without power hungry bureaucrats. Arbitrary enforcement of laws seems to happen often, and alcohol is always a magnet for attention.

Not a lawyer, but I don't see how "donations" don't make them vulnerable to being shut down. You could eliminate donations but who would brew a batch of beer for other people for cost?

I have an inquiry in with them. I am not in SF nor even in the bay area anymore but close. These are all good questions and I will ask when and if I hear back from them. Seems like at very least it's a fun way to get to brew more often.

It seems like semantics to me to make a distinction between paying for ingredients and paying for the beer itself. But maybe there's an argument there. I think the conduct of the CSA itself, however, plainly amounts to either illegal distribution, illegal retailing, or both (especially in the NY case where members pay for homebrew "shares," as opposed to making voluntary donations). These are privileges that homebrewers have never had under the homebrewing exemption statute. Also, the benefit of the homebrewer exemption only applies to natural persons because it uses the term "adult," which is expressly defined as a person who is of legal drinking age. A corporation doesn't get to brew up to 200 tax-free gallons per year when it turns 21.

I too contacted the CSA and am awaiting a reply. I live in CA but nowhere near SF. Like I said earlier it seems like such a great way to get homebrew to the people and enable us to brew more. Like most homebrewers I have a ton of recipes/styles that I want to try, not to mention refining favorite recipes. I really do enjoy brewing beer more than drinking beer. I thought I read on one of the brewing law blogs that homebrewing has never been litigated. Does that mean that no one has ever been fined/arrested for violation of homebrewing laws?

As to the tax issue: yes, you have to report bartering, but that is up to you to do and not the corporate entity helping you engage in bartering. If the entity is a true non-profit, it is exempt from taxation. And the "income" you gain from an exchange like this is likely no greater than the cost, which would mean you wouldn't actually have to pay any additional taxes.

As to the likelihood of the CSA being prosecuted: San Francisco doesn't have resources to prosecute this kind of thing, as far as I know - and it would be a hugely unpopular move for the police or the DA to go after a CSA of any kind, or homebrewers, for that matter. The SFPD condones obvious illegal and even underaged drinking in Dolores Park for this reason. "Illegal" on the books just doesn't always mean illegal in San Francisco.

As to the tax issue: yes, you have to report bartering, but that is up to you to do and not the corporate entity helping you engage in bartering. If the entity is a true non-profit, it is exempt from taxation. And the "income" you gain from an exchange like this is likely no greater than the cost, which would mean you wouldn't actually have to pay any additional taxes.

I haven't done a complete read-through of the IRS regulations on the subject however I believe that unless the barter exchange meets certain exemption criteria they do need to file a 1099-B information return with the IRS, whether they are a for-profit or not-for-profit entity.

Also, bartering income would technically reported based on the fair value of services received, not the net profit on the transaction. You would be paying taxes on the fair value, not the net.

If anyone wants to take the time to read through everything the IRS has on it here's a good resource:

I thought I read on one of the brewing law blogs that homebrewing has never been litigated. Does that mean that no one has ever been fined/arrested for violation of homebrewing laws?

This was something I wrote in the article on the homebrewing exemption statute for Pint of Law. It doesn't mean that no one has ever been fined/arrested for engaging in conduct outside the scope of the exemption benefit. What it means is that if anyone has ever been fined/arrested, they have not challenged those penalties in court. I have no information regarding whether and how frequently the TTB or state agencies have actually targeted homebrewers.

I thought I read on one of the brewing law blogs that homebrewing has never been litigated. Does that mean that no one has ever been fined/arrested for violation of homebrewing laws?

This was something I wrote in the article on the homebrewing exemption statute for Pint of Law. It doesn't mean that no one has ever been fined/arrested for engaging in conduct outside the scope of the exemption benefit. What it means is that if anyone has ever been fined/arrested, they have not challenged those penalties in court. I have no information regarding whether and how frequently the TTB or state agencies have actually targeted homebrewers.

There is a certain Pro-Brewer who has told the story of years back making 1.5 barrels at a time, and having a group that would "buy" the beer (not sure what he said the payment scheme was). He was having fun until the Cease and Desist letter came from the BATF, also asking for back taxes to be paid. He decided to go Pro then, and be legit.

If you get big enough, you will draw attention.

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Jeff RankertAnn Arbor Brewers GuildAHA Governing Committee BJCP NationalHome-brewing, not just a hobby, it is a lifestyle!

I haven't done a complete read-through of the IRS regulations on the subject however I believe that unless the barter exchange meets certain exemption criteria they do need to file a 1099-B information return with the IRS, whether they are a for-profit or not-for-profit entity.

Yes, you have to file something, but you are still basically exempt from taxation in the end.

Also, bartering income would technically reported based on the fair value of services received, not the net profit on the transaction. You would be paying taxes on the fair value, not the net.

Your income reported is the amount of services received, but you can deduct your tax basis (essentially the same as cost) in the transaction. So you are reporting everything as your income, but you are only paying tax on (essentially) the net income. It is not fundamentally different than exchanging money for items of value. AIt's like when an individual person sells his used car, he has to report the money he makes on the deal as income, but he can also deduct the cost of that car (less depreciation, which he may have been deducting all along).

But this is all beside the point. The fact that there are potential tax consequences of trading homebrew for ingredients and feedback does not necessarily make it "liquor sales." You give them a recipe, they give you ingredients. Then you give them beer and they give you back other peoples' beer. I don't think the transactions described by this "donations not required" CSA would be considered a sale in California. My biggest concern would be that the system would eventually be unable to sustain itself because of too many free riders.

Nice article. I think that pretty much sums it up. I'd like to see the laws regarding this relaxed but I'm not holding my breath. Maybe once the AHA finishes up the state by state war to completely legalize homebrewing this might be a good issue to devote some supportive resources to.